Canada's proposed tax changes and previous emphasis on public infrastructure investment during the Liberal Party's election campaign will derail efforts to balance the federal budget by 2019 and see the ruling party's self-imposed CAD10bn deficit cap breached.
The impact of low oil prices on Canada's merchandise trade balance will increasingly be offset by manufactured goods exports, paving the way for the current account deficit to narrow over the coming years.
Canada's central bank will maintain the overnight rate at 0.50% until 2017 when stronger economic growth will prompt the beginning of a gradual interest rate hiking cycle.
Key Forecast Changes
Having previously forecasted a balanced budget by 2016, we now see the federal government's revised 2019 for a balanced budget missed, forecasting a 0.5% of GDP deficit in 2016, rising to 0.8% of GDP by 2019.
We have revised our current account projections for Canada after a bigger-than-expected decline in oil prices, now forecasting a deficit of 3.1% of GDP and 2.7% of GDP in 2015 and 2016 respectively. We previously projected the deficit at 2.8% and 2.4% of GDP.
Key Risks To Outlook
High household leverage and continued housing price growth could lead to a crash in the real estate sector and trigger a recession.
Continued downside in global oil prices will take a toll on Canada's economy and could depress business confidence.
|f=BMI View. Source: National Sources/BMI|
|Nominal GDP, USDbn||1,761.4||1,523.2||1,502.6||1,587.2||1,679.3|
|Real GDP growth, % y-o-y||2.5||1.2||1.8||2.0||2.0|
|Consumer price inflation, % y-o-y, eop||1.5||1.6||2.0||2.2||2.2|
|Exchange rate CAD/USD, eop||1.16||1.39||1.38||1.36||1.33|
|Budget balance, % of GDP||0.1||-0.2||-0.5||-0.8||-0.9|
|Current account balance, % of GDP||-2.3||-3.1||-2.7||-2.3||-1.9|
The Canada Country Risk Report helps businesses with market assessment, strategic planning and decision making to promote growth and profitability in Canada. It is an essential tool for CEOs, Chairmen, Finance Directors/CFOs, Managing Directors, Marketing/Sales Directors with commercial interests in this emerging market.
An influential new analysis of Canada's economic, political and financial prospects through end-2019, just published by award-winning forecasters, BMI Research.
- Forecast the pace and stability of Canada's economic and industry growth through end-2019.
- Identify and evaluate adverse political and economic trends, to facilitate risk mitigation.
- Assess the critical shortcomings of the operating environment that pose hidden barriers and costs to corporate profitability.
- Contextualise Canada's country risks against regional peers using BMI's country comparative Risk Index system.
- Evaluate external threats to doing business in Canada, including currency volatility, the commodity price boom and protectionist policies.
BMI provides our fully independent 5-year forecasts for Canada through end-2019 for more than 50 economic and key industry indicators. We evaluate growth, and also forecast the impact of economic management.
Economic Outlook Contents
The Canada Country Risk Report features BMI's forecasts with supporting analysis for 2015 through to end-2019, set against government views and BMI's evaluation of global and regional prospects.
Key Areas Covered:
- Full 10-year forecasts with data - for key macroeconomic variables including GDP (real growth and per capita), population, inflation, current account balance and the exchange rate.
- BMI's comprehensive Risk Index system - rates each country worldwide for economic and political risk, and rates the business environment, within a global and regional context.
- Economic Activity - real GDP growth, employment, inflation, consumption (retail sales and confidence).
- Balance of Payments - trade and investment, current and capital account.
- Monetary Policy - interest rate trends (bank lending and deposit rates) and inflation (producer price and consumer price).
- Exchange Rate Policy - currency controls, foreign investment flows, exchange rates and foreign exchange reserves.
- Fiscal Policy - macroeconomic strategy and policies, government finance and tax reforms.
- Foreign Direct Investment - approvals, inflows and climate.
- External Debt - debt profile (short and long-term plus public and private sector obligations).
- Global Assumptions - forecasts for each year to end-2019 covering: major commodities, growth in key regions, inflation, and interest and exchange rates, in the United States, Japan, China and the eurozone.
- Rely upon BMI's 100% independent forecast scenarios for Canada and underlying assumptions - we take no advertising and are privately-owned.
- Exploit the benefits of BMI's comprehensive and reliable macroeconomic database on Canada, sourced and fully maintained by BMI from an extensive network of private sector, government and multilateral contacts.
- Gain key insights into the current and future direction of government economic policy, which could significantly affect your company's business prospects, from BMI's team of analysts and economists.
What are the political risks to doing business in Canada over the next 5-years?
BMI's Canada country Risk Index evaluates the short- and medium-term threats to political stability.
Political Outlook Contents
- SWOT Analysis for the Canada Market - Political Strengths, Weaknesses, Opportunities and Threats facing Canada.
- Political Stability and Risk Assessment - BMI's Risk Index assesses explicit short- and long-term risks to political stability; latest positioning and trends for Canada's risk are compared with regional and global averages.
- Current Administration and Policy-making BMI assesses the threats to the continuity of economic policy, and likely changes to the business operating environment.
- Long-Term Political Outlook BMI examines the structural risks to the stability of Canada’s political system and the dominant public policy issues likely to affect decision-makers, and outlines scenarios for how the state could evolve in the medium to long term.
- Benchmark Canada's risk profile against its neighbours, the global and regional average, allowing easy comparison of risks between key business markets.
- Identify, evaluate and anticipate political and security risks to the business environment, and to your company's current operations and future plans.
- Gain valuable insights into government and policy-making, through BMI's specialist team of analysts and economists, and their network of private and public sector sources.
Key Sector Outlook*
Which industry sectors in Canada will grow fastest, and where are the major investment opportunities in the market?
BMI identifies investment opportunities in Canada's high growth industries including automotives, defence & security, food & drink, freight transport, infrastructure, oil & gas, pharmaceuticals & healthcare and telecommunications & IT.
Key Areas Covered:
- Market Overview - Size and value of each industry, including recent sector developments and major industry key performance indicators (KPIs) that have impacted company performance.
- 5-year Industry Forecasts - Forecasts for each year over 2015-2019, using BMI's proprietary industry modelling technique, which incorporates key domestic and international indicators - including economic growth, interest rates, exchange rate outlook, commodity prices and demographic trends - to provide fully integrated forecasts across and within each industry.
- Demand- and Supply-Side Data/Forecasts - BMI's industry data covers both the output of each industry and the domestic demand, offering clear analysis of anticipated import/export trends, as well as capacity growth within each industry.
- Target strategic opportunities in high growth industries, which are benefiting from global mega trends, and thus offer strong investment and growth opportunities.
- Compare the growth path of different industries to identify which are best placed to benefit from domestic and international economic prospects, and which have historically suffered from volatile growth trends - a key indicator of future risks.